The Mark Zuckerberg Indicator

Spotting absurdities is both enjoyable and entertaining. Can you imagine a more agreeable vocation? For what could be more flattering than pointing and laughing at a mob of your peers as they stomp and pant in unison like boobs on parade?

Markets, of course, offer ample opportunities for otherwise intelligent individuals to behave like utter blockheads. Visions of easy riches and luxury accommodations are nearly more powerful than love. They soften the brains and warm the hearts of the most unlikely suspects.

Soon even the most intolerant curmudgeon’s willing to beat the drum for a load of bull if he thinks it’ll make him rich. Take bitcoin, for instance. Several short months ago the crypto-currency was flying high…trading for over $1,000.

Early buyers were becoming overnight millionaires. A new era had come into existence faster than a New York minute. That’s when true believers and suckers alike went all in. They wanted to get their share too. The sky was the limit.

But, alas, a key bitcoin exchange, Mt. Gox, bit the dust earlier this week. From what we gather, losses could be up to $367 million…or even $409 million. Nonetheless, last we checked, bitcoin prices had stabilized and were mounting a recovery. Can you believe it?

Morons Get Rich

Stranger things have certainly happened. At the moment, it’s still unclear whether other bitcoin exchanges will endure. Perhaps, another crypto-currency will come to the forefront. A repeat of the Mt. Gox vaporization could never happen again, right?

Quite frankly, we don’t care one way or the other. We have no skin in the game. We’re merely attentive observers. But that doesn’t mean we aren’t without interest. Rather, what we are after around here is instruction.

Aside from the tragic losses, the Mt. Gox ignominy offers some enlightening insights. Moreover, it offers some rich education. So where to begin?

There must be a prominent gene in the human makeup that triggers resentment when others prosper. The resentment is especially strong when morons get rich. Somehow, when filled with the powerful and destructive emotion of envy, even the best of us can give in.

How can you not? There the mob goes, right in front of your very eyes, getting rich off the trend du jour. Be it bitcoin…flipping condos…or shares of pets.com. All you have to do is buy and watch in delight as the price goes up. It’s simply marvelous.

The Mark Zuckerberg Indicator

Despite all notions of rationale thought and common sense the narratives propelling these shiny objects into orbit are too compelling to ignore…especially when they’ll make you rich. What’s lost in the race to get in is the simple fact that there’s no such thing as a free lunch. The mania can only go on for so long before it implodes upon its own dead weight.

Everyone knows that a fool and his money are soon parted. That, no doubt, is one of life’s essentially axioms. Yet at one point or another all of us play the fool. Minimizing the frequency and consequences is the trick.

Still, some suckers bets are easier to spot than others. Stocks, for example, seem rather frothy at the moment. The S&P 500’s pushing into new highs.

What’s more, the NASDAQ’s hitting prices last seen at the peak of the dot com bubble…over 14-years ago. Seemingly illogical things are happening. Mark Zuckerberg just paid $19 billion for a mobile phone App…and he thinks it’s worth much more.

Obviously, Zuckerberg is much smarter than we are. He’s got the money to prove it. Even so, as a little guy investor looking to avoid playing the fool, his purchase – among other things – obliges us to pause.

While nobody rings a bell at the top of the market, Zuckerberg’s purchase may be sounding the alarm. Now, it seems, is the perfect time to take some chips off the table. At a minimum it’ll preserve your dignity…it may preserve your balance sheet too.